Almost three-quarters of business leaders are aware their organisation is under threat from disruption but many are not taking the risk of change seriously, according to an analysis of 500 UK and Ireland executives.

Only half of enterprises see startups as a serious threat and almost one in ten do not believe they have any challengers in their market. In fact, seven per cent of executives say they are not concerned about the threat of digital disruption whatsoever.

Dell EMC -- which commissioned the research -- discussed emerging points of interest from the survey with industry experts at a recent event in London. One of these experts, Kevin Hanley, head of innovation at Royal Bank of Scotland, shares his three best practice lessons for turning digital disruption into a competitive advantage.

1. Look beyond the traditional enterprise firewall

Hanley is responsible for a range of activities at RBS, including scouting for new ideas globally, running exploratory labs and implementing the governance processes that help take creative ideas from theory to practice. It is a role he relishes.

"I get to speak to some very smart people around the world -- we meet more than 1,500 technology companies a year, from big beasts in Silicon Valley to smaller UK-based startups," he says. "I believe the world, particularly in finance, is changing at an unprecedented rate. Technology is becoming faster, cheaper and more ubiquitous."

Hanley says this radical change represents a significant shift for finance firms. The operations associated to traditional banking are being broken into smaller components and many of these elements are being offered by entrepreneurial, non-sector specialists.

Successful finance firms, says Hanley, must recognise and embrace this change. To succeed in an age of disruption, big banks must combine their long-standing skills with the knowledge held by new entrants.

Business leaders looking to innovate, therefore, must look beyond the traditional enterprise firewall. However, Hanley warns other executives that the cultural element of change is more difficult than the technical transformation, particularly from evidence in his own sector.

"Finance is becoming more competitive and businesses must be more open," he says. "Your success as an executive will be driven by your ability to work with others. There are opportunities for firms of all sizes with the right skills to be competitive. Your organisation must be technically able and culturally willing."

2. Bring great ideas from the edge to the core

Hanley says organisations looking to transform must make progress on two dimensions simultaneously: the present and the future. First, organisations must focus on their existing set-up, they should simplify systems and make technology more efficient. "Fix the complexity that you already have to improve the core," he says.

Second, when it comes to the future, Hanley says executives should think about their desired aims and work backwards from that point. "You must challenge yourself to think about the world ten years in advance and the things you must do today to embrace the opportunities that are emerging," he says.

Hanley warns executives not to make a choice between his two dimensions of present and future. "You can't simply focus one or the other -- you must deal with both," he says. "If you focus on present priorities alone, you risk becoming a dinosaur; if you focus only on innovation, your basic operational concerns could fall down."

When it comes to the present, RBS spends £1bn annually transforming current activities and simplifying core processes. In terms of future-facing priorities, Hanley says his work around innovation for the bank draws on both technology and business.

Rather than being tied to one or the other, the innovation team works at the edge of the organisation. RBS has established separate governance and control process for innovation that allows Hanley and his team to experiment independently.

Hanley must ensure smart ideas from the perimeter are brought back to the core business. He points to several successes, including a reduction in the small business approval loan process from days to minutes. In terms of total numbers, Hanley says RBS is also the biggest enterprise user of the business social networking tool Workplace by Facebook.

So, who should lead innovation? While 49 per cent of senior executives believe CIOs should be responsible for driving technology innovation, according to the Dell EMC research, more than half (54 per cent) feel their IT leaders create too many controls that restrict the potential for creativity.

RBS views innovation as an activity that touches on all business units, rather than a fiefdom in the technology chief's domain. Hanley believes other businesses should take a similar stance and avoid placing power for digital disruption in the hands of the IT department.

As the push for digital transformation reaches an all-time high, CIOs are increasingly focusing on bringing their entire organizations into the digital future, all while preventing even the smallest hiccup in operations. It's a tall order.

"If innovation is solely the responsibility of the CIO, technology just becomes a hammer looking for a nail," he says. "If you try and change your organisation within normal business cycles, your creativity can get squashed. At RBS, we run short, sprint activity and there's a separate internal fund that I run like a venture capitalist."

Hanley and his team are currently exploring 40 innovation initiatives. He says formal progress reviews are crucial. Hanley runs monthly forums with chief executives at partner startup organisations. These forums include members of the RBS executive board.

"We know other business leaders wish they had our governance in place," says Hanley, reflecting on progress made and the conversations he has had with executives at other blue-chips. "Senior manager, including CIOs, must look beyond the immediate time horizon. Zoom out to the 10-year perspective and then zoom back to today."

IT leaders might be concerned the approach taken by RBS leaves them excluded from the innovation process. Hanley says additional governance processes ensure that is not the case. One of his deputies reports directly to the CIO, who in turn runs through the innovation portfolio and thinks through potential issues.

"Our CIO has line-of-sight of everything we do," says Hanley. "I have the engineering and technical capability to experiment, without having to beg and steal resources from enterprise IT. If we have solutions that are being incubated, the point at which we need to scale back into the existing business is when the link with the CIO really needs to work."

"You must challenge yourself to think about the world ten years in advance and the things you must do today to embrace the opportunities that are emerging," says RBS's Kevin Hanley

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